The final section of this
brief describes the scenarios presented in
the table below. For a downloadable Excel version, click HERE.

The Commonwealth’s Chapter 70 education funding formula aims
to ensure that every child in every district can receive an adequate
baseline education. The formula factors in the needs of a
district’s student population (e.g. directing more resources
to support low-income students and English language learners) and the
capacity of supporting cities and towns to raise local tax revenue. For
more specifics on how the formula works, see Demystifying
the Chapter
70 Formula.

For FY 2017, the Governor proposes increasing Chapter 70 aid by $72.1
million over last year (1.6 percent). In many ways, this proposal runs
the funding formula in standard ways, using updated enrollment and
inflation data, continuing the gradual phase-in of reforms to how local
contributions are calculated, and guaranteeing a minimum $20
per-student increase.

In addition, the Governor proposes three significant changes related to
low-income students, which are the subject of this brief:

The budget uses a new method for
counting the number of low-income students educated in a given
district, driven by changes to how students are enrolled in the federal
school meals program.

In an effort to offset the reduced
low-income headcount generated by the change above, the budget
increases the low-income foundation budget rate for all districts.

The budget further increases the
low-income foundation budget rate for districts with greater
concentrations of low-income students.

While these changes combine to increase support for low-income
students
(a statewide foundation budget increase of $55.5 million, or 4.5
percent), this proposal nonetheless generates less Chapter 70 aid for
some districts than they otherwise would have received. To address
challenges with the new low-income student measure (change #1 above),
the state could consider carrying over FY 2016 free and reduced meal
percentages as a temporary stopgap while continuing for another year
its work to better count low-income students under the new measure. And
if the state does use the new measure, we should at least use the most
up-to-date data possible.

Independent of which low-income count is used, the state could still
move forward with increases to the low-income foundation budget rate
for districts with concentrations of low-income students (change #3
above). Further, it could consider implementation of other
recommendations made by the Foundation Budget Review Commission.

In this brief we walk through these changes one-by-one, analyze their
combined effect for every district, and present a couple of alternative
options.

New Method for Counting Low-Income Students

For Chapter 70 enrollment purposes, the state counts low-income
students by using the number of kids receiving free and reduced price
meals. For a long time, parents enrolled their children in the school
meals program by filling out forms at the beginning of each school year
demonstrating that their income was below 185 percent of the federal
poverty level.

Recognizing that many of these families are already enrolled in other
public programs that use similar income criteria (e.g. MassHealth and
food stamps/SNAP), the federal government recently simplified this
application process by allowing districts to enroll kids directly for
free meals if they are already enrolled in one of these other programs
(a process called “Direct Certification”). Further,
districts that directly certify at least 40 percent of their students
for free meals now have the option of providing free meals to all
students, regardless of income (called “Community
Eligibility”). For more detail, see FAQ:
Expanding School
Meals and Implications for School Funding Formulas.

While these changes do much to improve the school meals
program—increasing the number of kids receiving free meals
and reducing administrative work for districts—fewer kids
have been enrolled through the new direct certification process than
had been enrolled through the traditional income verification forms.
These reductions create a problem for the Chapter 70 formula since
simply using the new school meal headcounts would lead to large
reductions in district foundation budgets that aren’t
reflective of real world decreases in the number of low-income kids
that they are educating. And the size of this gap varies widely by
district, so the problem can’t be solved by making a uniform
upwards adjustment to the assumed cost of educating low-income
students.

Because there’s no easy way to align these new school meal
enrollment numbers with the old numbers, one stopgap option worth
considering is applying free and reduced meal percentages used by the
FY 2016 budget to FY 2017 enrollment totals. In fact, some Community
Eligibility districts, like Boston, have already carried over prior
year low-income percentages. Doing this for all districts in FY 2017
would provide a reasonable estimate of total low-income students, since
the data is (mostly) just one year old and would buy the state and
districts additional time to implement strategies for closing the gap
(Direct
Certification for School Meals: Feeding Students, Counting Kids,
Funding Schools describes some of these potential
strategies). Carrying
over old percentages would only be a temporary solution, but it might
lead to less disruption for FY 2017 than using new school meal counts
would.

Rather than carrying over current year’s percentages, the
Governor’s FY 2017 budget follows a recommendation
from DESE
to use the new measure and call it "economically disadvantaged." This
new measure identifies many fewer low-income students for three primary
reasons:

The state is not matching school
enrollment lists with all relevant public programs. For instance, in
the fall of 2015, when the MassHealth match began, the matching process
did not include the MassHealth Limited program, which covers
approximately 16,000 children.

Not all low-income families enroll in
the public programs for which they are eligible.

There are technical challenges in
matching public program enrollment data with school enrollment lists
that remain unresolved. Therefore, even some students enrolled in
public programs intended to serve as a match are not being directly
certified for free meals and thereby counted as “economically
disadvantaged.”

The Department of Elementary and Secondary Education, in
collaboration
with districts and community partners, has recognized that the new
school meals enrollment process has created transition challenges
(along with opportunities) and has been working hard to close the gap
described above. In fact, steps like increasing the number of data
matching queries to four times per year have already helped reduce the
gap considerably.

Despite this progress, the new measure for “economically
disadvantaged” students in FY 2017 still captures 18 percent
fewer low-income students than does the measure currently used for FY
2016. And there are wide variations in the size of this gap across
districts. Below are ten districts with some of the largest declines.
None of these districts had large declines in total enrollment.

Low-Income Foundation Budget
Rate Increase

Due to the wide variation in gaps under the old and new methods for
enrolling in the federal school meals program, simply swapping in the
new estimates would lead to reduced Chapter 70 allocations for many
districts. The Governor’s Chapter 70 proposal attempts to
account for this reduction by making an upwards adjustment to the
low-income rate in the Chapter 70 formula—from an incremental
cost of $3,142 in FY 2016 to $3,775 in FY 2017 (see Deciles table
below). This 20 percent increase is roughly the size of the statewide
decrease in enrollment counts and is intended to serve as an offset.
But because actual differences vary widely across districts, this
uniform adjustment doesn’t solve the problem for many
districts. Until the size of these gaps becomes more uniform across
districts, a uniform adjustment will not solve the challenge.

Ultimately, improving the enrollment of eligible families in public
programs (e.g. MassHealth and food stamps/SNAP) and improving our data
matching systems would serve to help close these gaps. This will also
better ensure that the headcounts used by the new
“economically disadvantaged” measure accurately
reflect the student populations in every district.

Foundation Budget Increase for Concentrations of Low-Income Students

In addition to making the uniform adjustment to the low-income
foundation budget rate, the Governor proposes increasing this rate for
districts with concentrated poverty, following a similar recommendation
made by the Foundation Budget Review Commission (read the full report
HERE).
Since these higher rates apply to all districts uniformly, this
proposal does not solve the problem of variable gaps across districts
under the old and new school meal enrollment approaches. But taken on
its own, this is a proposal for supporting districts with greater
proportions of low-income students that is worth consideration.

Under the Governor’s approach, districts are broken out into
deciles based on the percentage of students identified as
“economically disadvantaged.” The decile with the
lowest-poverty districts uses the $3,775 increment for each low-income
student in their district, and then this increment is increased by $40
per student for each subsequent decile. The decile with the
highest-poverty districts uses a $4,135 increment for each
“economically disadvantaged” student.

This proposal helps offset foundation budget reductions for
districts
with the largest gaps between the new economically disadvantaged
measure and their current free and reduced price meal headcounts, but
it does not fully offset these reductions for many of them. For other
districts with smaller gaps between the new and old measures, this
proposal helps increase the resources available for supporting
low-income students.

The Combined Effect of these Low-Income Changes on Chapter 70
Allocations

These changes combine to increase the statewide foundation budget for
low-income students by $55.5 million over FY 2016. If permanently
incorporated into the foundation budget, this increased funding could
help many districts better support their low-income students. But
because of the wide variation in changes to low-income student
headcounts under the new “economically
disadvantaged” measure, the Governor’s proposal
nonetheless generates less Chapter 70 aid for some districts than they
otherwise would have received.

The table below shows low-income foundation budgets under the
Governor’s proposal compared to what they would have been if
instead the Governor had applied last year’s low-income
percentages to FY 2017 enrollment totals. For these districts, the two
increases to low-income student rates (the base rate increase and
increases for concentrations of poverty) are not enough to offset the
effect of their reduced low-income headcounts.

Technical note: Foundation
budget estimates in the “FY 2017
Governor (w/ FY16 Low-Inc %s)” column above are calculated by
making two adjustments to the Governor’s proposal:

Instead of
using FY 2017 Economically
Disadvantaged headcounts, we multiply FY 2016 Low-Income percentages by
total FY 2017 enrollment, in order to estimate total low-income
students in FY 2017 under the old method of enrolling in the school
meals program.

We undo the
Governor’s
upwards adjustment to the base low-income rate, since this adjustment
was made by the Governor to offset the lower Economically Disadvantaged
headcounts, which is no longer an issue when making change #1 above.
These estimates still include the Governor’s $40 per pupil
increases for each higher low-income decile, but the increases start
off of a lower base amount.

Because of the formula’s hold-harmless provision, lower
foundation budgets don’t actually lead to cuts in Chapter 70
aid for any of these districts (and the Governor’s budget
guarantees a $20 per student increase). But many of them would see
increases in Chapter 70 over the Governor’s proposal if
instead the formula used FY 2016 low-income percentages (see the middle
column in the table below).

Statewide, the Governor’s Chapter 70 proposal is a modest 1.6
percent above current FY 2016 levels, whereas total state revenue
collections are projected to rise 4.3 percent over FY 2016. With this
in mind, the Legislature could consider additional changes to the
Chapter 70 formula in FY 2017, and still keep the total increase in
line with state revenue growth (a 4.3 percent increase to Chapter 70
would total roughly $194 million).

For the purposes of illustration, we present one option in the
right-hand side of the table below, increasing the base low-income
increment up to the minimum level recommended by the Foundation Budget
Review Commission (FBRC). Specifically, the Commission found that
low-income funding increments in the Chapter 70 formula are below what is identified as best practice in
the academic literature. Therefore, the Commission recommended:
“(B)ased on its review of national literature, practices in
other states, and model districts within our own state, the Commission
offers the guidance that that weighting should fall within the range of
50%-100% and that multiple concurrent interventions are necessary to
effectively close achievement gaps. The final decision should provide
high poverty school districts with enough funding to pursue several
turnaround strategies at once.”

Currently, average low-income weighting in the Chapter 70 formula is 41
percent of the average base rate, so for the Alternative Scenario
presented below, we raise it to 50 percent in order to match the lower
bound of the FBRC’s recommendation. Because this scenario
maintains the Governor’s decile approach for greater
concentrations of poverty, we set this new 50 percent increment level
at the middle of the decile distribution; districts with lower
concentrations of poverty receive an increment lower than 50 percent
and districts with higher concentrations of poverty receive an
increment higher than 50 percent.

Raising the average low-income increment to 50 percent of the average
base rate would increase Chapter 70 aid by $177.6 million (3.9 percent)
over FY 2016, a bit less than projected state revenue growth.

Below is a table comparing Chapter 70 aid under the
Governor’s budget with these two alternative approaches. As
above, we present data for the ten districts with the largest drops in
their foundation budgets for low-income students under the
Governor’s proposal. Many other districts receive smaller
decreases under the Governor’s proposal and some others
receive increases.

Ultimately, the Governor’s proposed low-income changes help
increase Chapter 70 aid modestly for many districts in the
Commonwealth. The challenge, however, is that the size of these
increases varies widely, and some districts actually receive less aid
than they would if FY 2016 low-income percentages were used instead of
the new economically disadvantaged headcounts. While carrying over old
enrollment percentages would only be a temporary solution, it would
give the state and districts valuable time to implement strategies (for more on this click HERE) to provide more accurate direct certification numbers
by the time FY 2018 budget season comes around.

See below for related
Chapter 70 detail for every detail in the Commonwealth, and for a
downloadable Excel version click HERE.

This research was funded in part by the Annie E. Casey Foundation. We thank them for their support but acknowledge that the findings and conclusions presented in this report are those of MassBudget alone, and do not necessarily reflect the opinions of the Foundation.

Massachusetts Budget and Policy Center

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